The Housing Bubble

A report from the Marin Independent Journal in California. “The median price paid for a home in Marin County in July climbed to $1.1 million, up 14.9 percent from the $957,500 median posted a year earlier. At the same time, CoreLogic also reported that the number of new and resale homes and condos sold in Marin in July dipped to 291, down 14.4 percent from the 340 homes sold in July 2017. Marin real estate professionals said they are seeing buyers dropping out in the low end of the Marin market under $1 million due to either fatigue from failing to find a home that has both value and a lower price point, or simply being priced out of the market due to low inventory in the lesser price ranges.”

“‘Some people who thought they could afford to buy last year now suddenly are feeling they can’t afford to buy,’ Blaine Morris, a broker with Pacific Union International real estate in Kentfield. ‘The mix of properties still creates disproportionate illusion of price increases, as the mix is very tight under $1.25 million and especially under $1 million. People in those categories simply aren’t moving.’”

“Barry Crotty, a broker with Coldwell Banker Realtors in Greenbrae, said buyers seem to be wary after hearing news of interest rate hikes announced earlier this year by the Federal Reserve Bank. He has been seeing a decline in ‘over-asking’ offers, meaning buyers offering higher-than-the-asking price, and also less multiple offers.”

“Both Morris and Crotty said they are seeing less homes being purchased in Marin with all-cash offers and more with mortgage loans being granted by banks. CoreLogic analyst Andrew LePage said similar trends are evident across the Bay Area. He said the cumulative increase in mortgage interest rates over the past year was significant across the region. ‘The combination of price increases and higher mortgage rates, which have climbed more than half a percentage point over the past year, means the mortgage payment on the median-priced home in the San Francisco Bay Area has risen about 19 percent over the past year,’ he said.”

The Sacramento Bee. “Sacramento’s once hot housing market continued its cooling trend in July, with median prices dipping slightly in five of the six local counties. The local numbers mirror those in the Bay Area, where sales numbers and prices have begun to flatten in recent months in what some observers say is a natural plateau. Price increases over the last seven years have left most households statewide unable to afford a median-priced home.”

“In Sacramento County, the median price for home sales, including used and new, dropped marginally in July to $360,000 from $362,000 in June, according to CoreLogic. The recent flattening has fueled some speculation that home prices in Sacramento will face a dropoff. Placer was the only local county that saw its median price increase, going from $495,000 in June to $498,000 in July. El Dorado County’s median price dipped as well from $499,000 to $485,000. In the Bay Area, the median price dropped to $850,000 in July, down from the record high of $875,000 in May and June. The number of homes sold dipped 10.2 percent from the previous month.”

“Jordan Levine, an economist for the California Association of Realtors, said he sees a ‘market shift’ toward a slower growth period, where home prices will continue to rise but at a more pedestrian rate. On one hand, he said, mortgage interest rate increases can dampen buyer enthusiasm. But the economy overall remains solid. ‘We are at a 40-year low in unemployment and we are starting to see wage and income growth after a long hiatus.’”

“Builders in Sacramento, burned during the construction frenzy of the mid 2000s, remain cautious about adding new stock to the market.”

The Turlock Journal. “The City of Turlock’s sales tax revenue has continued to steadily decline for nine consecutive months according a recent report, replicating numbers that haven’t been seen since the Great Recession. Turlock’s sales tax revenue has consistently fallen since mid-2017 — a sharp decline which was last seen in 2008 and 2009, according to Maryn Pitt, assistant to the city manager for housing and economic development.”

“According to Pitt, the City has seen the greatest decrease in the building materials wholesale economic segment, which comes during a time when home construction across the country is beginning to slow down, as well as auto sales for both new and used vehicles. ‘The different segments can go up and down. When the economy was not so great, the restaurant segment fell off, and now we see that construction is way down,’ Pitt said.”

“Without consistent development, whether industrial or residential, sales tax revenue can take a hit. ‘It’s not the fact that we’re going to get sales tax every quarter from Target — we’ve been successful with that — but the problem is with the one-time money,’ Pitt said. ‘In the manufacturing sector, no one is buying equipment where we can actually collect that.’”

“While the City’s sales tax revenue numbers may look foreboding, they are ever-changing and unpredictable, Pitt reminded. Improvement is essential, as some of the City’s most critical services, like police and fire, hang in the balance. ‘We’ll get those numbers in September and see where we are,’ Pitt said. ‘If it’s down again, then that’s obviously a huge concern.’”